Ford Still Losing Money

Third quarter financial results are out, and Ford is lost $129 million in the third quarter, which would be horrible if it weren't for the fact that it lost $8.7 billion last quarter. The main reason that this is a bright spot, however, is that it removed a $2 billion liability for future retiree health care costs from its books in a one time transaction, by having the UAW assume responsiblity for retiree health care costs after Ford established a trust to finance that obligation.

Ford is still burning through cash, however, consuming $7.7 billion of cash in the quarter leaving it a reserve of $18.9 billion. Thus, if it can't turn itself around or secure more financing (despite adverse bond ratings), Ford will run out of cash sometime in June or July of 2009. Industry analysts are more hopeful and think that Ford has enough cash to keep operating until some time in 2010.

The news is not good for company employees. Layoffs are planned for 2,260 more white-collar employees in North America, after a year that has already seen substantial employment reductions.

The automaker started the year with 89,000 employees in North America but reduced that number to 80,200 as of Sept. 30 through attrition, hirings, buyouts and layoffs.

In a further effort to cut costs, Ford said it will eliminate merit pay increases in 2009 for salaried workers in North America, along with performance bonuses for salaried employees worldwide. It also will suspend matching contributions for U.S. salaried employees who take part in the company's savings and stock investment program.

Segment reporting reveales more of the nature of the problem:

Ford said it lost $2.6 billion pretax in North America, compared with a loss of $1 billion in the year-ago period.

It recorded a pretax profit of $480 million in South America, compared with $386 million last year. In Europe, the company made $69 million, a sharp drop from the $293 million in the year-ago period.

Ford's Asia-Pacific operations made $4 million, down from $30 million a year ago, while it lost $1 million on its interest in Mazda, compared with a profit of $14 million in the third quarter of last year.

Volvo lost $458 million, wider than the $167 million loss last year. Ford Motor Credit Co. had a pretax profit of $161 million, far lower than the $546 million in the same quarter last year.

Foreign operations remain profitable, as are its financing operations, but this is all swallowed up in the pit of its core North American motor vehicle manufacturing business that loses thousands of dollars for each vehicle it sells in North America.

Ford has sold its Jaguar and Land Rover subsidiaries and is believed to be looking for a buyer for money losing Volvo.

All three of the Big Three CEOs are in Wasington this week asking for a bailout.